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Money In Malaysia Case Study

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From the articles, it tells us that the prices of sugar will be increased by 34 sen to RM2.84 per kilo today. There are a hike on the price of sugar because Malaysia government removed subsidy of sugar. The last remaining amount of sugar subsidy of RM0.34 per kg was to be removed was announced by the Prime Minister of Malaysia, Najib Tun Razak on October 2013 based on the Malaysia Budget 2014. Surprisingly, Malaysia is the only country with a sugar subsidy, this policy commenced in 2009. Sugar was a controlled price product in Malaysia while now the sugar subsidy having been reduced gradually over the last 4 years. Historical sugar retail price in Malaysia Month Price per kg December 2009 RM 1.45 January 2010 RM 1.65 July 2010 RM 1.90 December …show more content…

When the price of sugar increased, the demand of sugar has not changed very much. Means that the percentage of changes in price is more than percentage changes in demand and this is to prove that sugar is very inelastic. The graph above illustrates the effect of reduction in subsidy by 34 cents in response to the Budget 2014 proposal. The diagram below showed that the curve “S1”, the supply curve before the government remove the subsidy of 34 cents. On the other hands, the “S2” is the supply curve minus 34 cents subsidy. At 34 cents subsidy, the demand curve D and supply curve S1 determine the price of sugar at RM2.50 per kg and the quantity produced is at Q1. However, the reduction in subsidy shifts the supply curve S1 leftwards to S2. The equilibrium quantity reduced to Q2, the price climbs up to RM2.84. Due to the Prime Minister of Malaysia, Najib Tun Razak announced on October 2013 that prices of sugar will be increased by 34 sen to RM2.84 per kilo. It seen like expected future price. The government had announced to consume about the future price of a sugar, so to their own benefit and purchase more sugar than previously they bought before the rises of the sugar. Thus, the demand of the sugar will be increases before the period. So, the demand curve of sugar increases from D1 to D2 as the diagram showed

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